For decades, California has lived up to its Golden State nickname. And while most businesses have held steady or grown through the last few years of economic instability, others have fallen victim to the changing times represented by shifts in both workplace and consumer habits. Lenders hope they make deals with borrowers who will thrive, and while diversification can be a good defense against loaning to a singular industry that suffers a collapse, it isn’t bulletproof. One resource these commercial lenders have is Total Lender Solution (TLS). TLS is a foreclosure processing partner in California, and the TLS team is always watching the market conditions. Here’s a look at how things shape up heading into 2024.
California Commercial Foreclosures By the Numbers
As California entered January, PropertyRadar.com data showed its active commercial real estate foreclosures to be 944.
The biggest concentration of commercial real estate foreclosures was in the following communities:
- Los Angeles (215)
- San Francisco – San Jose – Oakland (186)
- San Diego (171)
Los Angeles Commercial Foreclosures
The City of Angels, and the counties immediately outside of Los Angeles, make up one of the world’s largest economies. Here, business typically thrives, and the market’s 5.5 million people ensure that the commercial environment prospers. However, the area makes up for nearly 25% of active California commercial foreclosures entering January 2024.
The largest property measures an astounding 1.1 million sq. feet. The facility is a fifty-year-old medical center that provides services to thousands daily. Purchased for $226,000 in 2010, the building now has an assessed value just short of one billion dollars.
Total Lender Solutions founder and CEO Randy Newman says this is an example of how some commonly stable commercial properties can find themselves in trouble. “Many would think that medical centers would not be prime candidates for the foreclosure process. However, these types of assets struggle with some of the same challenges commercial offices face. Doctors retire, close their practice or consolidate. Some of these doctors have the wealth to leave a medical center office and purchase a standalone commercial building for their practice.
Bay Area Commercial Foreclosures
The Bay Area, San Francisco in particular, featured very prominently in the news as retail and commercial offices seemed to close down at an alarming rate in San Francisco.
There were numerous properties of 100,000 sq. feet or more in the foreclosure process heading into the new year. One of them was a hotel property in the Nob Hill community of San Francisco.
With an assessed value of $90 million, the property has an outstanding loan amount of $26 million dollars.
“Hotels can slip into foreclosure much easier than people realize. If a specific area faces a downturn, and we’ve seen the headlines about San Francisco’s challenges in and around the city, tourism can evaporate quickly. Also, most people don’t consider that when corporate offices go vacant, there is an impact on the hospitality industry. Less business travel means fewer people are booking hotel rooms and dining at restaurants because they are comfortable at home having their meetings on Zoom,” said Newman.
San Diego Commercial Foreclosures
While a bustling city in its own right, San Diego has a commercial real estate foreclosure rate much higher than the Los Angeles or San Francisco markets.
America’s Finest City saw 171 commercial real estate foreclosures entering January 2023, and the largest ones measured almost 100,000 sq. feet and like we saw in the Bay Area, these properties were hotels.
“When you see a series of hotels in the same metropolitan area in foreclosure, that really is an indication of the market as a whole. If you are a lender with money tied to other hotels in the area, you could be left wondering, “Is my property next?”” said Newman.
When to Start a California Commercial Foreclosure
If you’d like to discuss starting the California commercial foreclosure process, connect with us. Our team works with lenders and their attorneys to maximize recoveries on defaulted loans. We transform the complicated process of foreclosing commercial real estate into clear resolutions for institutional and private lenders.
Fill out a form today, and let us assist you.
